Over at eWeek, I’ve filed a column about the fight the tech community is waging on Capitol Hill to codify its views about stock options and how they should be treated on corporate balance sheets.

A piece of legislation, formally known as H.R. 3574, would made pretty much everyone happy is awaiting action in the House. Tech cut a good deal, going against all its dearly held precepts about bargaining, lobbyists, and insider politics. And if the bill is enacted into law, it won’t be a scene out of “Mr.Smith goes to Washington.” Since almost nothing – apart from obscenity-tinged insulting – is going on in the U.S. Senate if tech gets a securities bill, it’ll be late at night, attached to a larger piece of legislation, some sort of monster-sized, hard to understand, impossible to read in a hurry, spending bill. But, as the eWeek column makes clear, even if the bill doesn’t pass, plenty of progress getting the Federal Accounting Standards Board to see Silicon Valley’s point of view on options has been made. Whatever happens, it’s unlikely to be as bad as it could have been.
The stock option fight drives me nuts for a couple of reasons. One, it’s a fight between two parties who use the same language but mean very different things. Tech CEOs and venture capitalists won’t tell you that they need options to create a class of people who can and who will – given enough cash – go onto create their own companies. Accountants and other regulators look at the process and how it’s used at big companies – and eBay is perhaps the local stand-out here – and ask who’s really benefiting besides corporate officers. But look around the valley: options from Silicon Graphics helped launch TiVo. SGI was launched by Hewlett Packard options. As I type, folks at eBay, Salesforce.com, and yes, Google, are figuring out what they’ll do next. The six months where the figure out their new business and don’t take a salary will be funded by options.
The valley has only recently begun to make this argument – the innovation pitch – to counter charges about CEO packages and insider deals (one word: Enron). And it’s made, not surprisingly, a lot of progress. But still, the argument that’s made about options is something of a stand-in for a larger issue: the need for a whole series of changes in the law to accommodate the fact that many, many workers – most of them in these industries – no longer work for large companies.
Options – which are essentially a way to give employees a sense of financial security even if the move from job to job – are only part of that. And no one really wants to talk about the fact that they’re often not widely distributed in a democratic fashion but that’s a issue that lingers.
In a world with a with a flexible and fluid workforce, a means needs to be found to start distributing equity all the way down the foodchain. Insurance issues – individuals pay more than corporations and can deduct less – are also in need of a good think. In short, there needs to be a top-to-bottom look at the nation’s tax code. Oh, and that nasty little trick some companies – particularly start-ups like to pull – where they don’t hire, they just have contract workers? That would go away, too, giving the right legal treatment. So would the “part-time” scam that keeps people from giving employees more hours to keep from triggering benefit costs.
There aren’t any heroics in this. It’s hard to imagine a rally for revision of the U.S. Tax Code, isn’t it? But it ought to be done. If options legislation fails – and that’s the safe bet right now – Silicon Valley might find that a larger, not smaller, approach, where it formed a few alliance outside its usual coterie of friendly faces — could fly.